Business may be viewed as the foundation of economy of any country. Business classification as provided by the European legislation cannot be directly adapted to the actual business environment in Latvia. This leads to a discrepancy between theory and practice (it is known that mostly existing theories are attributable to the large companies). Therefore, the article is devoted to classification of Latvian com-panies including theoretical and practical examples applied to the developed classification base. As the main conclusion, it is shown that the proposed classification is useful for both theoretical and applied objectives.